Energy v. Electricity; What is the AZ Corporation

Commission

Nancy LaPlaca, J.D.Advisor to AZ Corporation

Commissioner Paul Newman, Esq. Arizona Corporation Commission

nlaplaca@azcc.gov602-542-3682

June 25, 2011

Agenda – Hour One

• What is the AZ Corporation Commission and why should I care? Bio’s

• Energy v. electricity: emissions from electricity v. transportation

• Energy: net energy is key

• What about fossil fuel depletion?

• Global warming: what does it mean?

• 4 minute YouTube of Richard Heinberg: 300 Years of Fossil Fuel History in 300 Seconds

The AZ Corporation Commission (ACC) – Why Should I Care?

• The ACC is one of 7 ‘constitutional’ and 13 elected Public Utilities Commissions (PUCs) in the U.S.

• The ACC has authority over power plants

• Generally, participants at the ACC are the (monopoly) utilities, the large energy users (such as mines), utility shareholders…not many public interest participants.

• Bottom line: ACC has enormous authority over energy policy, and clean energy needs only THREE votes out of FIVE elected Commissioners….

• See www.azcc.gov for more information…or call our office 602-542-3682 and come visit us!

Arizona Corporation CommissionerPaul Newman

• Commissioner Paul Newman is one of the five elected Comm’rs, see www.azcc.gov

• Newman was elected in 2008, and is up for re-election in 2012

• Strongest solar supporter at the ACC

• Nearly 20 years as state legislator and Cochise County Supervisor, long history of environmental work.

• Committed to transparency, disclosure, fairness

Nancy LaPlaca, Policy Advisor

• Policy Advisory to Comm’r Paul Newman

• Help with issues ranging from water and wastewater utilities, AZ cooperatives, electricity, gas, new technologies, solar, wind, natural gas; rate cases – many complex issues.

• Background: JD from ASU (1993), Fine Arts (ASU 1990); worked for 2 AZ Congresspersons, state legislature, Court of Appeals, Supreme Court; lots of research and writing; private companies in research, writing, IT, systems integration.

• Exciting time to be working in energy policy!

Please contact me and visit us at the ACC:nlaplaca@azcc.gov

602-542-3682

Agenda – Hour One

• What is the AZ Corporation Commission and why should I care? Bio’s

• Energy v. electricity: emissions from electricity v. transportation

• Energy: net energy is key

• What about fossil fuel depletion?

• Global warming: what does it mean?

• 4 minute YouTube of Richard Heinberg: 300 Years of Fossil Fuel History in 300 Seconds

U.S. Energy Consumption

Source: www.doe.eia.gov

NOTE: most RE is biomass or existing hydro; solar is

fraction of 1%

Hydro

U.S. Electricity Generation

Energy Administration Information www.doe.eia.gov

Arizona: GHG Emissions

Does not includeGHGs from

exported power.

Arizona Republic, CO2 Pollution Soars in Ariz., new study says, Shaun McKinnon, 11/13/09; http://www.azcentral.com/arizonarepublic/news/articles/2009/11/13/20091113air-carbon1113.html

Includes GHGs from

exported power.

Arizona Republic, CO2 Pollution Soars in Ariz., new study says, Shaun McKinnon, 11/13/09; http://www.azcentral.com/arizonarepublic/news/articles/2009/11/13/20091113air-carbon1113.html

Agenda – Hour One

• What is the AZ Corporation Commission and why should I care? Bio’s

• Energy v. electricity: emissions from electricity v. transportation

• Energy: net energy is key

• What about fossil fuel depletion?

• Global warming: what does it mean?

• 4 minute YouTube of Richard Heinberg: 300 Years of Fossil Fuel History in 300 Seconds

Net Energy is Key Concept• Net Energy = the energy left after using energy to drill,

mine, transport, compress, combust, build, etc.• Also called E-ROI (Energy Return on Investment)• Energy costs are going to rise: Should we invest in

renewables, with higher capital (building) costs, or fossil fuel, with increasing fuel costs and high Operation and Maintenance (O&M)?

• “Externalities” increasingly important: global warming, water scarcity; also enormous health effects from fossil fuels we’ve ignored for decades

• Environmental justice issues: local, U.S., global

Energy balance (EROI) is critical

Input Output

U. S. oil industry today

Ethanol from corn

Kerogen from marlstone;

oil from tar sands SAGD?

?

What are other impacts, like Gulf Oil spill?

The easiest-to-getresources are extracted

first. Example: deepwater v. onshore

drilling for oil.

National Renewable Energy Laboratory Innovation for Our Energy Future

Two-thirds of Energy From Coal Plants Lost as Heat; Natural Gas Combined Cycle

More Efficient

Generationand

distribution

Inefficient gasappliances

Inefficientelectric

appliances

WasteWaste Waste

Fuel forelectricity

Naturalgas

Power,light,and

usableheat

02458605

Source: A Micro-Grid with PV, Fuel Cells, and Energy Efficiency, Tom Hoff, Clean Power Research.com

Energy Slaves?

• Fossil fuels are extremely dense form of energy

• ~8 calories of oil embedded in every calorie of food delivered

• Oil runs our just-in-time economy

• Renewable energy (solar, wind) not nearly as dense, not available ‘on demand,’ difficult to store energy

• We will likely continue to electrify our transportation system – running a car on coal-fired power emits less pollution than gasoline because car engine is so inefficient.

Agenda – Hour One

• What is the AZ Corporation Commission and why should I care? Bio’s

• Energy v. electricity: emissions from electricity v. transportation

• Energy: net energy is key

• What about fossil fuel depletion?

• Global warming: what does it mean?

• 4 minute YouTube of Richard Heinberg: 300 Years of Fossil Fuel History in 300 Seconds

“Peak” Oil: Means Peak in Production

Gap Between Oil Discovery and Production

Energy Export Databrowser

• Very interesting energy database at: http://mazamascience.com/OilExport/

• Shows timeline of energy use by country and resource

• Can combine countries and/or resources

Many Countries Are Starting to Use Natural Gas That Was Exported

NOTE: Egypt oil netexports peaked before 2000; but consumption continues to rise;while overall production falls…

IEA World Energy Outlook Current and Predicted World Oil and Gas

Production levels

U.S. is Counting on Increase in Shale Gas Production

Agenda – Hour One

• What is the AZ Corporation Commission and why should I care? Bio’s

• Energy v. electricity: emissions from electricity v. transportation

• Energy: net energy is key

• What about fossil fuel depletion?

• Global warming: what does it mean?

• 4 minute YouTube of Richard Heinberg: 300 Years of Fossil Fuel History in 300 Seconds

Indicators of a Warming World

John Cook, “The Scientific Guide to Global Warming Skepticism,”skepticalscience.com, December 2010

The Water Cycle

The Economist, “For want of a drink,” May 20, 2010

10 Vital Systems for Spaceship Earth

Grist article about “Planetary Boundaries: A Safe Operating Space for Humanity,” 9/09

The Earth is Warming

John Cook, “The Scientific Guide to Global Warming Skepticism,”skepticalscience.com, December 2010

Climate Change: Expected Impacts

http://news.bbc.co.uk/2/hi/science/nature/8324428.stm, October 2009

Water Availability: Stressed Areas

http://news.bbc.co.uk/2/hi/science/nature/7821082.stm, Dec. 8, 2009

Climate Change Impact on Water in U.S.

Analysis by Tetra Tech for the Natural Resources Defense Council (NRDC), July 2010Climate Change, Water, and Risk

The Carbon Cycle: Human Contribution

John Cook, “The Scientific Guide to Global Warming Skepticism,”skepticalscience.com, December 2010

Agenda – Hour One

• What is the AZ Corporation Commission and why should I care? Bio’s

• Energy v. electricity: emissions from electricity v. transportation

• Energy: net energy is key

• What about fossil fuel depletion?

• Global warming: what does it mean?

• 4 minute YouTube of Richard Heinberg: 300 Years of Fossil Fuel History in 300 Seconds

What is Arizona’s Electricity Mix, and How Much Solar?

Total in-state

Electricity use

Is 50% coal,

32% NG, 17%

nuclear

Coal:49%

Total solar PV capacity: 21 MW installed in 2009, 54 MW installed in 2010; v total in-state capacity of 16,000 MW, it’s a tiny amount…

Source: US Energy Information Agency October 15, 2010

TOTAL AZ generation =

~120,000 GWhs because AZ

exports 25-30% of power

AZ’s Electricity Mix

• Total in-state generation: 25,000 MW

• Total in-state consumption: 16,000 MW– 50% coal– ~28% natural gas– ~22% nuclear– Less than one-tenth of 1% solar

• 54 MW installed in 2010• Total in-state solar: ~100 MW

Coal, Nuclear, Natural Gas, Solar, Wind, Solar Hot Water….

• Issues are complex and confusing because different types of power plants have pro’s and con’s

• Coal and nuclear plants run 85-90% of the hours in a year

• Solar only makes electricity when the sun shines; however, AZ has the best land in the U.S. for solar because it is very flat and we have consistent sunshine

• KEY: we don’t include all the life-cycle costs of electricity generation, such as pollution, acid rain, health effects from burning coal, possible water pollution from natural gas drilling etc.

• We are at crossroads on energy policy – what do YOU think we should do?

AZ Renewable Energy Standard (RES) is 15% by

2025Year Requirem

ent

2008 1.75 %

2011 3.00 %

2014 4.50 %

2017 7.00 %

2020 10.00 %

2024 14.00 %

After 2024

15.00 %

AZ’s RES means that 15% of the kilowatt-hours generated by regulated utilities come from ‘clean energy’: solar, wind, biomass, solar hot water, concentrating solar etc. by 2025…

AZ’s RES is far lower than Colorado (30% by 2020), California (33% by 2020), Nevada (25% by 2025).

The Effect of Much Higher EE Savings

46

37%

33%

24%

6% 0%0%0%

Coal

Natural Gas

Nuclear

Conv. Hydro

Renewables

Energy Eff.

Other

19%

24%

18%

4%

15%

20%0%

AZ 2008 AZ 2020

- Energy Efficiency becomes one-fifth of the energy “pie” in 2020 - Lower total costs, lower utility bills, more jobs, less pollution- Deferral of 3 large baseload plants 2020’s to 2030’s (by then more renewables, storage, electric vehicles)-$9 billion in lower customer bills (2011-2030; APS, TEP, Coops)

Solar Hot Water (SHW): Huge Potential for AZ!Total

U.S., not just AZ

How much does AZ spend on fossil fuels every year?

AZ Imports Most Fossil Fuels

• AZ imports all its Natural Gas and 2/3 of coal• AZ spent $1.5 billion importing Natural Gas

(NG) for electricity in 2009– Another $800 million spent on NG for heating– Shale gas has been a game-changer, brought the

price of gas way down, but ultimately depleting– During Katrina, cost of NG doubled; also doubled

from 2007 to 2008 when oil peaked at $147/barrel

• AZ spent $500 million in 2007 importing

coal

Cost of Natural Gas - More Volatile Since 2000

U.S. Currently Imports 5-12% of Natural Gas Consumed

Coal Capacity Factor MuchHigher Than Natural Gas:

AZ Can Hybridize NG plants!

U.S. Natural Gas and Coal Fleet Capacity Factors, 1976-2007

his graph from the IEA shows the production levels - and predicted production levels - of oil and gas in the world. IEA

World Energy Outlook

Why doesn’t AZ have more clean energy?

Why doesn’t AZ have more clean energy?

• Many reasons, but here are a few:– Monopoly utilities granted geographic territories (APS,

SRP, TEP etc.)– Large central-station power plants– Distributed generation is a new player, and solar has

only recently come down in price– Politics and the corrupting influence of fossil fuel $$$– Utilities don’t want to give up sales to ‘disruptive’

technologies.– The more distributed solar, the LESS revenue for

utilities; lost ‘fixed’ costs…

Kevin Phillips, Bad MoneyFrom ASPO-USA Conference, October 12, 2009

Manufacturing declined from60% to less than 10% of

corporate profits

Financial services increasedfrom less than 10% to nearly

50% of corporate profits

Local v. Out-of-State

Dollars

$73 out of every $100

spenton locally-

owned businessesstays local

Local v. Out-of-State

Dollars

Only $43 out of every $100

spenton non-local businesses stays local

What are ‘externalities’ and why should I care?

“Externalities” in electricity• Uncounted costs are called “externalities” and include:

– Subsidies– Air pollution, water use and pollution– Mercury contamination– Lost productivity, morbidity and mortality– Health effects from fossil fuel burning

• 12/08 coal ash spill in TN cost $1.2 billion• Power plants are big water users: nuclear the most, then

coal; solar PV and wind use zero water; Concentrating Solar Power can be wet or dry. Wet CSP that uses a steam turbine uses as much water as a coal plant but does not pollute the water.

$72.5 billion for Fossil Fuels

$12.2 billion for Wind and Solar

68Damages from these plants exceed $500 million a year

NOTE: CLIMATE CHANGE

DAMAGES NOT INCLUDED, ONLY SO2, NOx, PM 2.5

&10

National Academy Estimates Criteria* Pollutants from 406 Coal Plants Cause

$68B/Year $68B/Year Damage

Coal’s Externalities / True Costs

Dr. Paul Epstein, Harvard study, Feb. 2011 “Full Cost Accounting for the Life Cycle of Coal”,

Coal-fired power plants produce 50% of U.S. electricity. Coal costs the U.S. $500B annually over its life cycle(extraction, transport, processing, and combustion)

•$74B in public health burdens in Appalachian communities•$187.5B from health costs of cancer, lung disease, and respiratory sickness in other parts of the U.S.•$29.3B from mercury impacts•$205B from carbon emissions’ climate impacts on land use, energy consumption, and food prices•$18B from the costs of cleaning up spills of toxic waste, the impact of coal on crops, property values, and tourism

Externalities would raise costs of electricity from coal-fired plants, from $0.10 / kWh to $0.28 / kWh, shifting it from one of the cheapest sources of electricity to one of the most expensive.

Water Intensity of Electricity Generation

0

500

1,000

1,500

2,000

gal/M

Wh

Conventional Generation

Emerging Technologies

Renewables

Gas

, Com

bust

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Turb

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gas,

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Coa

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capt

ure

Gas

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Geo

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ary,

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Coa

l, IG

CC

NG

CC

, with

car

bon

capt

ure S

olar

CS

P, w

et

cooi

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olar

CS

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ry

cool

ing

Bio

mas

s, s

team

pla

nt, w

et

cool

edIm

prov

ed B

iom

ass

stea

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lant

, wet

cool

ed

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l, st

eam

Geo

ther

mal

, bin

ary,

wet

cool

ing

Sol

ar P

VW

ind

Geo

ther

mal

, bin

ary,

dry

cool

ing

Source: Western Resource Advocates“The Energy-Water Nexus: A Case Study of the Arkansas River Basin” 2008

Water Intensity of Electricity GenerationWater Intensity of Electricity Generation

Coa

l, P

C w

ith c

arbo

n

capt

ure

71

APS’ RW Beck Study on the Value Of Distributed Energy

Operating Impacts and Valuation study

RW Beck study says the value of distributed solar is 7.9 to 14.11 cents/kWh in avoided costs for fuel, trans-mission, line losses, etc.

“With public sentiment nothing can fail; without it, nothing can succeed.”

Abraham Lincoln

National Renewable Energy Laboratory Innovation for Our Energy Future

Thank you!

Paul NewmanArizona Corporation Commissioner

pnewman@azcc.gov 602-542-3682